Generative AI tools such as ChatGPT and Claude have broken into the financial sector, offering users insight into managing and understanding their finances. According to Experian, approximately half of Americans have turned to these AI-driven tools for financial management, with 96% reporting positive experiences and 77% claiming weekly use for personal financial tasks.
The attractions of using AI, such as immediacy, personalized recommendations and the feeling of being in control are clear. However, concerns rise when considering the unpredictability of AI and the risks involved in financial decision-making. A recent study by MIT’s Sloan Business School suggests that while generative AI can simulate financial logic, the process often lacks transparency and predictability.
Professor James Mallory of the Rochester Institute of Technology notes that AI can help simplify complex financial calculations, alleviating the "heavy lifting" involved. Consequently, financial corporations are developing their own large language models (LLMs) such as JP Morgan's Quest IndexGPT and Wealthfront's Path.
While these tools are constructed with vigorous financial datasets and regulatory compliance, most people lack the ability to differentiate between good and bad AI advice. A Pew Research Center study found that only a third of those who consider themselves financially literate obtained their knowledge from the Internet.
The practical approach at present is to use AI to assist in investment planning rather than making decisions. AI can aid in comprehending investment mechanisms and basic strategies by providing context, clarifying terminology and evaluating trade-offs.
However, AI should not be relied upon entirely for creating a financial plan or directing retirement investments. Until artificial intelligence proves trustworthier, investors should turn to human financial advisors who can understand personal financial situations and review insights acquired through AI. AI can indeed be a valuable assistant for financial guidance, but it should not replace a human advisor's role.